How We Got to $286 Billion in Corporate Welfare: A Short History of Farm Subsidies

One of the bills Congress still has to vote on is the mammoth $286 billion Farm Bill. Farm subsidies have not always been a part of the federal budget. There was a time that the federal government understood and respected the Constitutional role it had in agriculture. That all changed with Herbert Hoover.

Following World War I, America’s farmers were dealing with falling crop prices. American farmers had been compensating for the lack of agriculture in Europe and following the Great War, there was a glut of product on the market. The farmers turned to the federal government. They found a friend in President Hoover, who started the Federal Farm Board via the Agricultural Marketing Act of 1929.

The act hoped to solve the low farm prices through a series of price fixes. For example, if a bushel of wheat was priced below 80 cents at market, or 20 cents a pound for cotton, the federal government would buy it up, store it and hope to sell it at a profit at a later date. Seeing that they had a secure payday from the government, farmers who did not grow wheat or cotton quickly switched over. This resulted in an overproduction of those two commodities, causing the prices of both to drop. The federal government ended up buying 250 million bushels of wheat and 10 million bales of cotton. The purchase and storage of these crops quickly burned through the program’s $500 million budget and the government ended up either giving the crops away, or selling them at a huge loss.

The Farm Board failed to recognize the unintended consequences of their program. Instead, in December of 1932, they issued a special report to Congress recommending legislation to “provide an effective system for regulating acreage or quantities sold, or both.” This plan would be approved on May 12, 1933. It would be part of Franklin Roosevelt’s New Deal and known as the Agricultural Adjustment Act (AAA).

The AAA would again attempt to manipulate the market. This time, the federal government would pay farmers to reduce their crop area, i.e. they were paid not to farm. But by the time the act began, the season was already well underway. Fields were planted and were already growing. There was an increase in overall acreage and the farmers were looking at some very favorable weather. This threatened to drive the price of cotton down even lower, which had already dropped from 29 cents a pound in 1923 to 6.5 cents a pound in 1932.On June 19, 1933 the government announced that in order to raise the prices of the crops, farmers would be paid to plow the fields under. The goal was to destroy 25 percent of the current crop, or 10 million acres. They reached it.

Corn prices were also low at this time, and farmers were able to feed more hogs than before. The expansion of the hog market was something the AAA felt it needed to deal with quickly. With the same mentality they used on the cotton and oats, farmers were paid to slaughter hogs and mother sows. In an effort to artificially raise prices, 6,200,000 pigs and 220,000 mother sows were destroyed at a cost of over $30,000,000. That comes to 443,697,348 pounds live weight. Only a fourth of that was made into food products. The rest ended up as inedible grease or fertilizer.

In America at this time, oat fields were being burned, but we were still importing oats. Pigs were being slaughtered by the millions, but we were still importing lard. Corn was destroyed, but we still imported 30 million bushels. People who were hungry were told by the government that America didn’t grow enough to feed them. All in the name of “national planning.”

“National planning” is a term that makes some people think of socialism or communism and it is important to recognize the communist influence in these programs. The Ware Group has a few members who started in the AAA, most notably is Alger Hiss. Leonora Fuller was an associate of Hiss’s from 1933 to 1935. She stated in testimony to the House UnAmerican Activities Committee that the AAA was not interpreted in the spirit of the law, but in ways that would benefit the Communist’s beliefs and private purposes. She said it was the purpose of this group to change the form of government in the United States. They were using the AAA to achieve that goal.

In 1936, the Supreme Court found the AAA to be unconstitutional, based on the fact that it taxed one group to pay another. But two years later, a second AAA was passed and allowed to stay. This time it was funded from general taxation and deemed acceptable by the Supreme Court.

The turmoil of the Great Depression is gone, relegated to the history books, but one of its socialist legacies continues today. Fourteen different pieces of legislation have been enacted since FDR’s time that not only continued, but expanded farm programs. That was supposed to end in 1996 with the “Freedom to Farm Act.”

The goal of this act was to phase out farm subsidies by 2003. Instead, in 1998, Congress passed an emergency supplemental bill because of declining crop prices. In 2002, President Bush finally put the Freedom to Farm Act out of its misery by signing a six-year appropriation bill that brought back the old system.

In just the last 26 years, farm subsidy payouts total more than half a trillion dollars. $164 billion have been paid in subsidies since 1997. Between 1999 and 2002, Congress passed supplemental bills totaling $76 billion. And recently, totals average around $20 billion a year.

The 2007 Farm Bill in Congress right now weighs in at a hefty $286 billion. The sad thing about it is we are making the same mistakes we have been making since the beginning.

Tomorrow: Subsidizing the Consolidation of the Family Farm: How Farm Subsidies Are Nothing More Than Corporate Welfare

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